In-Depth

Careers: IT Budgets Hold Steady

CIOs are tightening their belts, but not desperately slashing costs.

• By Stephen Swoyer
• 04/08/2008

The good news: CIOs aren't yet abandoning ship -- i.e., giving up on their current IT budgets and pursuing drastically reduced spending programs -- even in the face of almost unprecedented economic tumult.

In fact, according to market-watcher Gartner Inc., IT budget growth remains basically unchanged at 3.3 percent for the year.

That's the positive outlook of Gartner's worldwide survey of 1,011 CIOs, which it conducted between February 12 and March 12 this year.

The not-so-good -- but still not-exactly-bad -- news is that while 62 percent of CIOs reported no change in their 2008 IT budgets, nearly a quarter (23 percent) confirmed a decline in their budgets, while just 15 percent reported an increase in their budgets.

The upshot, Gartner suggests, is that IT budgets aren't perceived as "target rich" opportunities for cost-cutting. Whether this means that IT is perceived as more important -- and its budget less likely to be sliced and diced -- than in the past is anyone's guess, however.

"Overall, the majority of CIOs reported no change in their 2008 committed budgets. This indicates that IT budgets are not the 'target rich' environment for cost cutting they have been in the past. However, there is some softness, particularly in the U.S.," said Mark McDonald, group vice president and head of research for Gartner Executive Programs. "CIOs responding to the study report that IT budgets are still growing, even in the U.S., but growth rates are muted slightly. Historically, the revised numbers are in keeping with the past four years where IT budget increases have averaged 2.4 percent."

On the other hand, budget growth rates in the U.S. are softening: according to Gartner, U.S. IT budgets are expected to grow by an anemic 2.3 percent this year (down from an already anemic 3.1 percent). U.S. CIOs are also more likely than not to have cut IT budgets, with a full quarter of U.S. IT chiefs having cut their budgets -- and only 10 percent boosting their IT spend levels.

Most CIOs, however, report budget changes that are consistent with what Gartner characterizes as a "general belt-tightening program" rather than with an (ostensibly more desperate) restructuring of IT budgets or spending levels. For example, nearly three-quarters -- 72 percent -- of CIOs reported declines of 10 percent or less.

"We are seeing caution rather than wholesale cutting," said McDonald. "This is due to CIOs increasing diligence in managing IT spending over the past few years." Ironically, he says that conditions could and should improve from now on, as CIOs -- who are habitually cautious at the start of a new year -- loosen up their purse strings.

"The first quarter should be the most difficult in terms of budget changes as executives are cautious at the beginning of the year. CIOs are managing their budgets differently than in the past, on a greater business basis and that is showing up in the results of this first quarter study," he comments.

For the record, only one-third (32 percent) of CIOs reported having an IT spending contingency plan for 2008. That isn't good, according to Gartner: "Given economic conditions, CIOs should be prepared and have a contingency plan for both increases [and] decreases in the next 90 days [i.e., by the end of the second quarter of 2008]," McDonald concludes.